Bundling Strategies Driving Consumer Tech Growth in 2008

In terms of sheer impact on driving revenue within the consumer electronics marketplace, no strategy will be more important in the year ahead than the bundling of services and products, according to consumer/retail information provider The NPD Group.

As many of the fastest-growing electronics categories mature, and overall electronics sales growth plateaus in 2008, sales efforts will be increasingly focused on breadth of offer, and marketing messages on promoting the benefits of product/service integration, say NPD consumer technology analysts Stephen Baker and Ross Rubin.

"From a business perspective, there's no question that, for both retailers and manufacturers, bundling is the key to remaining profitable and maintaining growth," Baker stressed to Marketing Daily in a phone interview from this week's Consumer Electronics Show.

The analysts also stress the importance of a transformation in retail channels taking place in response to the rapidly changing tech product scenario. New products are creating new consumer segments, old channels are becoming ineffective, and retailers are rushing to create "micro-channels" that reflect the needs and preferences of these splintered consumer groups, they point out.



"There are so many different pieces to the consumer electronics puzzle now that retailers must focus on specific customer segments" to maximize pricing and profit opportunities, Baker says.

Retailers-and for that matter, device manufacturers-are shifting product strategies to focus more heavily on selling service and support as bases for premium pricing, and this requires differentiating offerings physically, in-store as well as in marketing messages.

"You don't want regular customers mixing with those willing to pay the higher pricepoints," he says, citing Best Buy's creation of Magnolia Home Theater stores-within-stores as one example.

Similarly, original equipment manufacturers are moving toward selective distribution strategies, Baker adds. More and more are using only certain retailers as channels or selling specific types of products only to specific retailers--as well as going directly to the consumer via Web sites.

Still, bundling and changing retail channels are far from the only new dynamics emerging this year, as various players jockey to gain leverage amid the burgeoning array of product and service choices.

For instance, faster broadband access speeds and new partnerships between Internet content providers and device manufacturers are spawning new home-entertainment options, but manufacturers will have to find viable positioning strategies against existing on-demand options.

"There are a growing number of broadband solutions for consumers--ways to bypass cable and satellite--but the question for device makers is how to monetize these" given that existing content providers are still naturally protective of their turf, Baker points out. Indeed, manufacturers have been heavily focused on discussing content control, and the potential for creating their own content, during CES, he observes.

Other trends that will shape the consumer tech industry this year, according to Baker and Rubin:

Wireless connectivity will spur manufacturers of all types of electronics devices, including PCs, portable navigation devices, MP3 players and digital cameras, to build wireless links into their products.

The looming February 2009 shut-off of analog programming by television broadcasters will cause consumers to rush to get low-cost, subsidized converter boxes, as manufacturers and retailers push to get them to upgrade to digital TVs.

Sales of high-definition optical disk players will benefit from greater HDTV penetration, lower prices and more content availability. However, many consumers will delay purchases until the Hollywood studios resolve format conflicts.

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